Now the executive committees of the Canadian Produce Marketing Association, Produce Marketing Association and the United Fresh Produce Association have come out with a joint statement supporting the PTI concept, eating a little crow as to how it was presented and making some minor changes to the deadlines.
Here is the whole release:
PTI END GOAL UNCHANGED, CHANGES COMING TO LEADERSHIP, MILESTONES, OUTREACH
The following statement has been approved by the Executive Committees of Canadian Produce Marketing Association (CPMA), Produce Marketing Association (PMA) and United Fresh Produce Association (United Fresh). It will serve now as the guiding direction for the Produce Traceability Initiative (PTI) from our associations:
Produce Traceability Initiative Action Plan Restatement May 2010
[As approved by the Executive Committees of Canadian Produce Marketing Association, Produce Marketing Association and United Fresh Produce Association]
In the three years since we organized a steering committee of industry leaders to evaluate the need and potential methods to implement whole-chain traceability, our industry has made tremendous progress in strengthening traceability across our industry.
The Produce Traceability Initiative (PTI) Steering Committee recommended industrywide adoption of GS1 global data standards for identification, tracking and capturing of key information about products and lot codes through the use of Global Trade Item Number (GTIN) assignments and their application to case coding. The committee also recommended a number of milestones based on the earliest potential dates at which it was believed different sectors of the industry might be able to incorporate such practices.
A tremendous amount of progress has been made toward adoption of these standards. But, we also have heard clearly from a cross section of the industry that some aspects of the PTI are proving more complex than anticipated, that there is uncertainty in commitment across the industry, that solutions not originally anticipated by the PTI Steering Committee may offer cost-effective and efficient options in achieving PTI goals, and that meeting the identified milestones will be problematic for certain sectors.
The Boards of Directors of CPMA, PMA and United Fresh have extensively reviewed all of these issues, and provide the following consensus recommendations for the industry.
1. We reaffirm our commitment to whole-chain traceability through the standardized global data platform of GS1. While this will be a challenging, multi-year transition toward standardization for our industry, we believe the entire food industry is moving in this direction, and that the produce industry will accrue benefits in traceability, efficiency and operations similar to past standardization initiatives such as Price Look-Up (PLU) coding and pallet size standardization.
2. In order for this initiative to be successful, it must have widespread and uniformly supported across the retail and foodservice industry, with consistent application. A primary goal of standardization is to prevent multiplicity of unique demands. Therefore, we are engaging leaders of the retail and foodservice industry to ensure that there is broad commitment and consistent expectation for this standardization initiative.
• In the foodservice sector, we have held discussions with leaders engaged in the Foodservice GS1 US Standards Initiative spearheaded by International Foodservice Distributors Association, National Restaurant Association and GS1 US to expand the use of these same standards. Their objective is to drive benefits in both enhanced supply chain efficiency and traceability. This initiative will impact directly on the produce supply chain as it will also require the use of the same GS1 standards recommended by PTI. There are lessons the PTI can incorporate from this initiative to help us reach our goal.
• In the retail sector, we are also strengthening our alignment with other fresh food initiatives so retailers have a more comprehensive value proposition built on the same GS1 standards in use across all fresh food categories sold in their stores. This requires a broader retail initiative addressing fresh foods and a coordinated approach with the foodservice sector so that suppliers to both sectors have a harmonized approach.
3. There has been much discussion about why Milestones 4 and 5 calling for case labeling of produce are set one year before Milestone 6, which calls for receivers to record or capture this data from case labels. Our Boards have reviewed this issue and believe it is appropriate to make these milestone goals simultaneous, placing Milestones 4 and 5 concurrently with the present anticipated date for Milestone 6.
4. With implementation of PTI, member companies are finding many questions about best practices and practical, cost-effective solutions at every stage of the supply chain. These include such disparate issues as the best ways to label cases in field packing, exchange GTIN data between seller and buyer or a common data pool, and capture outbound data from a retail distribution center to individual stores taking advantage of current voice-pick systems in warehouses.
Therefore, we recommend that a series of pilot projects be conducted in a variety of different commodity sectors, incorporating all segments of the supply chain from grower through retailer and restaurant. These pilot programs should address specific challenges identified by the different sectors, include use of different technologies and solution providers in order to evaluate multiple processes, and be transparent to all industry members as we share in lessons learned.
We intend to create these pilot projects under the auspices of the PTI, and also intend to engage commodity and regional associations as well as individual member companies in implementing pilots to address specific concerns applicable to their sectors of the industry. As projects are completed, we expect the PTI to make a thorough review of potential goals and milestones, consistency of commitment to adoption across industry channels, and best use of industry resources to achieve the desired goal.
5. There has been much discussion of the PTI milestones as potentially punitive deadlines for industry members. Our Boards recognize that adoption of any industry standardization initiative will result in early adopters who seek to gain efficiencies and marketplace support, those who transition to standardization more slowly, and those that lag behind. "In hindsight, we believe the PTI milestones should not have been written as “must comply” dates but rather as “target goals” to achieve. We recognize that meeting implementation milestones will vary by company, and that ultimate adoption is a marketplace decision, not an association directive."
6. Finally, we recognize the need for an even broader and deeper engagement with industry stakeholders in the leadership of the PTI. We are now undertaking a process to generate broader involvement with all stakeholders, and will work closely with each sector of the supply chain in development of the PTI pilot projects and future planning.
Our associations recognize and applaud the widespread commitment of our industry to produce traceability. A very large number of companies continue to perfect their strong internal traceability systems, and many commodity sectors can largely track product from the consumer back to its farm origin within a very short time. We remain committed to the creation of a GS1 standards-based system linking the different segments in our supply chain from the store or restaurant back through each step of the chain, while recognizing that our current commitment to food safety and traceability allows the majority of produce to be traced step to step back to the farm today.
Here are the key points:
A) Much of the release focuses on reaffirmation of the notion that the core nomenclature agreed to by the PTI Committee is the right way to go.
B) There is a somewhat vague reference to efforts to coordinate with the foodservice industry and other fresh food groups at retail. The release doesn’t say it, but there has been push-back from retailers and foodservice distributors who have made it clear that they don’t want produce-specific systems but want systems that will work across their operations.
Although efforts to engage with these other groups are a positive thing, it is not clear that going ahead with PTI “milestones” makes sense or will get support. If the key issue blocking retail and foodservice acceptance is the lack of a comprehensive plan for traceability across all items, it is not clear how agreeing to have meetings solves the problem. Maybe it is a sign we need to halt any deadlines or “milestones” until comprehensive plans are articulated.
C) One of the big controversies has been why the milestones that call for case labeling of produce had been set for a year prior to the milestone calling for receivers to record or capture the data. They changed this to make the milestones simultaneous by postponing the requirement for grower/shippers to do case labeling.
This sounds fair and probably is a step in the right direction but, in truth, the dynamic of the industry requires the receivers to go first. All shippers are going to do what is necessary to get and keep customers. If Wal-Mart wants RPCs, it gets RPCs — if it wants GS1 codes, it will get GS1 codes.
There are really only two issues with PTI:
Are receivers actually going to be set up to use this, bearing in mind that scarcely any of the individuals representing receiving organizations that endorsed the PTI has the actual authority to spend money equipping DCs with scanners, etc.? Notably missing during this three-year process are any press releases announcing the Board of Directors at receivers approving funding for becoming PTI-compliant.
Even once equipped, will the receivers constrain their supply chains to PTI-compliant product — even if it is more expensive? Once a store adopted standardized PLU codes, it was a big mess to handle anything not so coded. It is not obvious that lack of PTI compliance will be such a problem.
So the key point ought to be to reassure shippers that receivers will use and demand PTI-compliant product. Moving the shipper and retailer function to a simultaneous execution is a positive, but there has to be some distinction between the retailers’ already established strategic partners and other occasional suppliers that are not yet aligned with the retailers. What really should happen is a two-phase approach where retailers will work with their close strategic partners to be ready virtually simultaneously; then other, less closely connected shippers will move after the retailers have set up the system and begun showing preference for it.
D) The humbling moment in the release is this:
“In hindsight, we believe the PTI milestones should not have been written as “must comply” dates but rather as “target goals” to achieve. We recognize that meeting implementation milestones will vary by company, and that ultimate adoption is a marketplace decision not an association directive.”
This was a very good thing. Much of the bitterness over PTI was a matter of companies feeling that their associations, instead of serving them and helping them, suddenly were dictating to them.
If this new spirit animates future discussions, cooperation will improve significantly and people will be willing to speak out more frankly.
E) The rest is kind of a catch-all, trying to both promise broader and deeper engagement and trying to address the reality that PTI has limitations and will not, at least not in its current form, provide anything approaching complete farm-to-consumer traceability. It also promises various pilot projects to try and address concerns of specific industry sectors.
All in all it is a positive response, but the reality is that this is not a matter in the hands of the associations. Their deadlines and attitudes (although they can move things a bit one way or the other) are secondary considerations.
The standard is out there: Are big buyers actually going to get the money from their boards to implement the plan, and then are they actually going to constrain their supply chain to vendors who meet the standard?
If this doesn’t work, don’t blame Danny Dempster, Bryan Silbermann or Tom Stenzel. Execution here will require leadership from industry members.
The question is: Will that leadership be forthcoming? No association press release can answer that question.
We’ve dealt extensively with traceability, and a most valuable contributor to this coverage has been Gary Fleming. During his time as Vice President of Industry Technology & Standards at the Produce Marketing Association, Gary contributed to at least five pieces on the subject:
Today we come to the final piece in Gary’s most recent three-part series for the Pundit. What has become increasingly obvious is that short of a government mandate, significant portions of the industry will not move to adopt the Produce Traceability Initiative unless they are persuaded that there are benefits beyond those that relate to enhanced traceability in the event of a food safety outbreak.
One can agree or disagree with this attitude, but food safety encompasses a great deal and if a company conforms to the law and meets the requirements of its customers, it is very difficult for an outsider to a priori make the judgment that a company should invest more in traceability as opposed to, say, better wash systems, more traps, bigger buffers, more product testing or larger donations to the Center for Produce Safety.
Of course, this doesn’t mean that PTI is a failure. As Bruce Peterson, President at Peterson Insights, pointed out in his letter that we featured here, one may be placing a burden of excessive expectations on PTI in expecting it to “solve” all industry traceability issues. If the goal was to set an industry standard, and the various deadlines for execution are viewed only as hopeful wishes, then PTI is a great success in that it has established a set of industry standards and thus gives the industry something to work toward.
Clearly, the challenge in implementation is that most expenditures are done for one of two reasons: Either A) because “we have to” — there is a new law or regulation or client dictate and if we don’t do it, we will lose our license or customer and have to close up. Alternatively, B) the action is taken because it provides a return on investment adequate to motivate the expenditure.
Well, obviously if the law required PTI, that would seal the deal for almost all reputable companies. And as we mentioned here, if Wal-Mart, Kroger, Safeway, Supervalu, Sysco, Pro-Act and Markon all really do refuse to buy from people not PTI-compliant, that would pretty much be a “tipping point” for the industry and would move most large buyers and sellers into compliance.
But if the law does not require PTI and buyers won’t constrain their supply chains, then we are left with attempting to justify PTI on a return-on-investment basis.
This was the challenge we put to Gary Fleming. Could he try to explicate the benefits of PTI, both related to traceability and other benefits? We wanted to see if there was enough here to give industry executives ammunition to go before their boards of directors and build an ROI-case for PTI. Gary rose to the challenge and sent us this piece:
Benefits Derived from PTI (Produce Traceability Initiative)
In the first article of a three-part series to the Pundit, I had discussed what would happen to whole-chain traceability “Absent the PTI”. In the second article, I discussed traceability projects in other food sectors that could have impact on what your company is doing. In this final article of the three-part series, I will discuss some of the benefits that can be derived from implementing the PTI. As there are so many ancillary benefits to implementing PTI, I will only cover a few.
I will segment the benefits to implementing PTI into two separate categories: (1) those for traceability and (2) those not directly related to traceability.
Benefits Related to Traceability
The goal of the PTI was to create a process that utilized existing technology and existing standards to enable whole chain traceability with the minimal amount of costs. If we were not to go the standards route and everyone did what they wanted (as has been the situation), it would be difficult and time-consuming to put the pieces of the traceability puzzle together, causing both inaccuracies and severe time delays. This has been clearly evident in past recalls.
1. Standardizes what information is needed. What companies do inside their own four walls, while advantageous to them, does little to no good for those subsequent handlers of the product. If everyone has a different idea of what should be put on the case, it would be impossible for receivers to anticipate the different variations of what would be shown on the case for their hundreds of suppliers. Not only would they not know what the information is, but they would not have the capability to store it. Standardizing what traceability information is shown on every case allows every company in the supply chain to know what information should be put on the case, what information to expect and how and what information needs to be stored.
2. Standardizes how the information is captured. Without a standard on how the information should be captured (i.e., barcodes), any entity receiving product would have to accommodate multiple technologies (e.g., barcodes, RFID) and multiple formats (manual, two-dimensional barcodes, passive/active tags, etc.). Standardizing the use of barcodes to be used to capture this information (i.e., the GS1-128 linear barcode) not only allows for the vast majority of warehouses to use existing scanners, but also standardizes the format of the information encoded in the barcode. This addresses both the business need of capturing and storing pertinent traceability information needed for a traceback investigation, as well as the technical need of knowing the format of the information and how it is to be stored.
3. Allows for quicker access to information. With this pertinent information now stored in databases, as opposed to being filed in a cabinet on pieces of paper in multiple divisional offices, companies can now key in a GTIN and Lot/Batch # and within seconds know, at minimum, the following: (1) who shipped them the product, (2)when, where and how much of this GTIN — Lot/Batch # combination was received, (3) who was the product shipped to, (4) when, where and how much was shipped, (5) where was it stored in our facility, (6) on what purchase order/invoice was it received, and (7) on what purchase order/invoice was it shipped. This can be done in seconds, not weeks, giving the FDA the information they need to conduct their traceback investigation quickly, efficiently and accurately, with minimal delay.
4. Allows use of existing systems. What is used within your own systems to track product within your own operations can still be used. All that is required by the PTI is for companies to augment their internal systems to use the GTIN as the primary identifier of the case and the Lot/Batch # to track product back to a single lot or batch. Most companies already have an identifier for a case and most on the supply side already store the lot/batch. The balance of the information is already found on the purchase order, invoice or bill of lading. The PTI does not require companies to ditch their current traceability systems for something else.
Benefits Not Directly Related to Traceability
There are other benefits to implementing the PTI that are unrelated to traceability. To name a few:
1. Standardizes industry language. It is not uncommon for the supplier to have one number to identify the case, the distributor/wholesaler to have a different number for that same case and then finally, the retailer/operator having yet a different number for that same case. How efficient would it be for all subsequent handlers of a case to use the number that first appears on the case? This would eliminate the tremendous amount of cross-referencing and the resulting maintenance and errors caused by this process.
2. Enables electronic commerce. With the use of GS1 standard numbers, such as the GTIN for cases and the SSCC for pallets, it allows companies to use electronic commerce such as EDI (Electronic Data Interchange) and XML (eXtensible Markup Language) more efficiently. One study done at a major retailer indicated that with the use of EDI, it would save $9 per invoice. They were processing over 50,000 invoices per week. This more than paid for the investment made to use EDI within a single year.
3. Enables other supply chain efficiencies. Other efficiencies are now possible with the incorporation of GS1 standards such as CRP (Continuous Replenishment), ASN (Advanced Shipping Notice), Demand Forecasting, Enhanced Category Management, and use of RFID (Radio Frequency Identification).
4. Increases automation. Whether it be automating the input of business transactions (e.g. purchase orders, invoices, bills of lading, passing documents, load tendering, etc.) through the use of electronic commerce, or by automating the capture of information through the use of barcodes or RFID, a tremendous amount of human labor can be saved by replacing manual activities with automated ones.
5. Reduces inefficiencies. In an environment where raising the price to protect margins is not palatable to either your customers or consumers, cutting costs is a better option. Eliminating inefficiencies through automation, use of standards, increased partnerships, warehouse efficiencies, packing efficiencies, shared information (all of which are natural by-products of implementing the PTI) will all work to increase profits without raising prices. This is a win for the produce supply chain and a win for the consumer.
Every point mentioned above has been proven in other industries. Look at just about any former food industry initiative and you will find each and every element above as part of the initiative. Look also at the other food traceability initiatives: GS1 Foodservice Standards Initiative, Meat and Poultry Traceability Guidelines and National Fisheries Institute traceability project. All of them are endorsing the same fundamentals as the PTI: use of GS1 standards, use of barcodes (specifically the GS1-128 barcode), use of the GTIN to identify the case, the use of the Lot/Batch # to help with traceability. This is being done across the entire food supply chain, not just produce.
The produce industry, while different in many respects, is not too different from those sectors that have either already implemented these fundamentals or are just beginning. There are processes/practices that are virtually the same across all food sectors that can benefit from these fundamentals including, but not limited to: how product is packed, repacked, comingled, shipped, received, stored, warehoused, transported, ordered, invoiced, reconciled, etc.
It is not difficult to understand how the fundamentals of PTI have helped other food sectors or other industries. Nor should it be difficult to transpose those learnings to similar processes/practices in our industry, as a lot of these practices are horizontally integrated. The difficult part is to understand that doing nothing is not acceptable. We can do nothing and not solve the problem, further putting our industry and the consumer at risk. We can choose to do something on our own and in a proprietary manner, which will not help the FDA, nor your subsequent handlers. Or we can choose to do something that becomes an industry standard, allowing for critical mass and thereby getting our return on investment.
Remember, in the recall game, you are guilty until proven innocent. Even further, your subsequent handlers are guilty until proven innocent, thereby further exposing your product by those who have handled it and keeping it off the shelves until they are cleared. The easier we make it for the FDA, the easier they will be able to clear your product and the faster your product will make its way back to the shelf and on the consumer’s plate.
We appreciate Gary’s efforts to explicate on the matter. To some extent, PTI suffers from the problem of all standards… the investment always outweighs the cost until they become true standards with the vast majority of the industry standardized. Then industry efficiencies kick in.
We are not sure how persuasive this list Gary has provided will be. That is something each company will look at for itself.
What we would hope is that people will think expansively. Maybe right now, the benefits are not 100% clear but tomorrow is another day, and sometimes laying the linguistic foundation for tomorrow’s industry may lead to efficiencies we don’t even dare list right now.
We’ve had our disagreements with the way PTI came about. We hope the industry will take note of the difficulties that come down the road when agreements are hatched in secret. For the most part, the industry would benefit from vigorous debate earlier in the process, not after the trade is presented with a fait accompli.
Regardless of the lack of transparency with which PTI was developed, there is, at its core, a vision of a seamless industry, think RFID tags on every unit whirling through time and space and think of the ability to instantly see where everything has ever been.
There is nothing in PTI about RFID or readers on restaurant doors and in trucks, but inherent in a common language, a list of what information must be there and how it must be recorded, is, in fact, the kernel of information to move the industry to new levels.
The great Jewish sage Rabbi Tarfon is attributed with this pronouncement regarding obligations: “You are not obligated to complete the work, but neither are you free to abandon it.”
To our way of thinking, this is the way to think about PTI. It is a great work, with a kernel of vision so bright for the industry that we must not abandon it. Yet all those detailed timelines for implementation, all that expectation that we would complete this work so quickly, were and are over-done.
Yet we ought to move forward, and if our ROI is a little inadequate we have to remember a tale in the Talmud about Honi and the carob tree:
One day, Honi the Circle Maker was walking on the road and saw a man planting a carob tree. Honi asked the man, “How long will it take for this tree to bear fruit?”
The man replied, “Seventy years.”
Honi then asked the man, “And do you think you will live another seventy years and eat the fruit of this tree?”
The man answered, “Perhaps not. However, when I was born into this world, I found many carob trees planted by my father and grandfather. Just as they planted trees for me, I am planting trees for my children and grandchildren so they will be able to eat the fruit of these trees.”
So the fruit of our efforts on traceability may pay off, not today or in knowable ways, but in the future and in ways we can scarcely dream of.
Many thanks to Gary Fleming, President of the Symbolon, for helping us think through this important issue.
As we have thought about these issues and the broader area of food safety, we have come to conclude that much of the thinking in this area is limited because it doesn’t really focus on incentives.
Most of the “food safety community” is composed of either technical people — those looking for the actual solutions — or legal people — those dealing with working within the law. The community lacks business executives who focus on the power of incentives.
When there is a problem, the world quickly divides between industry groups, typically urging self-regulation and various advocacy groups urging government action.
Very often, the industry winds up supporting action by the federal government for a variety of reasons: For example, the industry typically wants uniform standards, not every state doing its own thing.
In food particularly, the industry has thought the idea of a government agency that consumers trust to declare all food safe is a great industry asset.
Now with the recent recalls on Romaine and Sprouts, food safety related to fresh produce is back in the news and advocacy groups are pushing for new laws.
We think there is a place for government in food safety matters, but, inevitably, safer food production has to be done by industry and we find much of the discussion around food safety to be too narrow.
It reminds us of nothing so much as the Kellogg-Briand Pact, an international treaty signed in 1928 that prohibited the use of war as a tool of policy.
Note the year of the treaty, to which the United States and other countries, including Germany, Japan, France and the United Kingdom, are still bound. Obviously the treaty didn’t prevent World War II or any subsequent conflict.
That inclination, to see a problem and want to outlaw it, is much of the same impulse behind the food safety legislation awaiting Senate action. It is focused on giving government more authority — mandatory recall power, for example — without any indication that these things will actually improve food safety.
We think there is a way to improve food safety and it has precious little to do with giving the FDA more power. We weighed into this public policy debate in an “online exclusive” published by an important journal based in Washington, DC, The New Atlantis: A Journal of Technology & Society:
The recent recall of fresh-cut romaine lettuce processed in an Ohio facility by a company called Freshway Foods has given a new rallying cry to activists trying to spur quick Senate passage of the FDA Food Safety Modernization Act. The Center for Science in the Public Interest (CSPI), a self-proclaimed consumer advocacy group, made this statement:
While consumers wait for Congress to pass food safety legislation, the plants that process and bag lettuce and the farms that grow it are operating under an industry honor system which clearly failed in this case. The FDA can’t tell us when it last had inspectors in the plant where this lettuce was processed. Congress urgently needs to give the FDA the resources and authority from the farm forward, transforming it from a reactive agency to an agency focused on preventing contamination.
Freshway is conducting this recall on a voluntary basis, because — even with the presence of this serious food safety hazard — FDA lacks the ability to order a recall. Giving the FDA mandatory recall authority is another reason why the Senate should bring S. 510, the FDA Food Safety Modernization Act, to the floor without further delay.
This is all a non sequitur. The implicated company promptly recalled its product in accordance with FDA requests; giving the FDA authority to recall would not have affected the case. The proposed legislation would require that the FDA inspect “high risk” food processing facilities just once a year and others once every four years. But the facility involved in this case already was regularly inspected by many government inspectors and private auditing groups. There is no indication that more frequent inspection by the FDA reduces the incidence of foodborne illness.
With its present authority, the FDA can already recommend anything it wishes. The great “spinach crisis of 2006” was, in fact, a simple FDA recommendation that consumers not eat, and vendors not sell, fresh spinach. The fact that the FDA had no mandatory recall authority did not matter: no reputable supermarket or restaurant chain would sell or use a product the FDA recommends against using.
In fact, if the FDA knew how to “prevent contamination” of fresh produce without compromising other values, such as affordability, it could simply suggest these procedures and recommend against the consumption or sale of produce not grown or processed in this fashion. It doesn’t do so, not because it lacks mandatory authority but because it hasn’t the foggiest idea of how to “prevent contamination” of fresh produce.
Indeed, the claim made by CSPI that food safety practices have “clearly failed” only makes sense if you believe that the proper goal for a food safety system applied to a product grown under the open skies, subject to wind, rain, animals, and other variables of Mother Nature, is that nothing should ever go wrong — an expectation for safety we don’t apply to autos, airlines, or any other facet of our lives.
The reality is that we know very little about food safety. Nobody knows the migration rate of E. coli O157 or how far a filth fly can carry a pathogen. In the absence of definitive answers, food safety on the farm is a continuum, not an absolute.
Common sense would indicate that if a five-foot buffer around a farm is good, a ten-foot buffer is better and a fifty-foot buffer better still. If putting a trap every hundred yards to catch rodents in the field is good, then trapping every fifty yards is better, and every twenty-five yards better still. If land floods, possibly bringing unknown pathogens to the soil, postponing planting for three months is prudent, six months more prudent, five years, super-prudent.
There is no place on the continuum of actions at which we can declare food to be definitively and absolutely “safe.” All of the food safety actions available to us are just steps toward reducing risk. Each of those steps has the effect of increasing the cost of the product to the consumer — and may also involve costs to other values, such as environmental preservation.
We are capable of building cars that could withstand 100-mile-per-hour collisions. But the law does not require this, because we recognize that such expensive, heavy, fuel-guzzling vehicles would contravene other values, such as affordable transportation and reducing our dependence on petroleum. Similarly, though we may value food safety, there are also other things we value. We don’t grow each leaf of romaine in a controlled indoor environment akin to a semiconductor manufacturing facility “clean room.” We don’t require agricultural workers to decontaminate and don hazmat suits to avoid passing pathogens on to the produce. These actions would increase the price of produce dramatically, thus depriving many of the opportunity to eat healthier diets. And even if these precautions were taken, there remains the possibility that cooks and servers — both at restaurants and at home — might contaminate the produce.
The FDA already possesses enormous power: It can and has stopped commerce in whole industries and blocked the entry of produce from companies and countries. With its vast influence on consumers and trade buyers, it can bankrupt almost any produce farmer, rancher, packer, or processor. Few will take the risk of crossing the FDA.
A Practical Plan for Reform
To be sure, government has an important role in food safety — properly understood in three categories. First, it must examine the legal system and understand that how it ascribes liability shapes the behavior of people and businesses. Second, government should work to change the incentive structure inherent in today’s liability system so as to encourage the desired safety activities. Third, the role of effective government in this arena needs to be reconceived not as simply bigger government but as government that does well what it attempts to do — more effectively discharging its traditional responsibilities of establishing a legal structure for commerce and effectively policing and contributing to the dissemination of knowledge.
How would this work in practice? Here is a six-point plan to revise and improve the federal government’s approach to food safety.
Although we gave HerbThyme a place to say its piece — and we think that the whole concept of the class action lawsuit is prone to abuse and not a sensible way of addressing this topic — we also found that HerbThyme’s Business Director Ben Ho was not as direct as would be desirable as to precisely what HerbThyme did or did not do and when they did or did not do it.
Subsequent to the piece running, we’ve had a lot of conversations with a lot of producers and we have come to think that the industry has a real and specific problem — apart from whatever HerbThyme did or did not do — related to produce fraudulently labeled as organic.
Here is the situation: We have mentioned previously that the percentage of produce being sold as organic is rising much faster than consumer demand for organic might indicate. The reason for this discrepancy is that many retailers, wanting to offer an organic option, but not wanting to double the SKU count, have been looking to standardize low volume products on organic versions. So the retailers may decide to only carry organic leaks or organic herbs.
The logic is simple: Those who want organic, really want organic. They may not buy the product or shop in the store if it is not organic. Most shoppers, though happy with conventional product, are also perfectly content to buy organic. So offering only organic lets the retailer satisfy both markets with the same product. Although there can be price differentials, these are low volume products and minor price differences are not likely to be noticed by most consumers.
It is all fine in theory but, as Wal-Mart learned when it decided to move into organics big time and spent disproportionate amounts of its procurement staff time searching for organic suppliers, wanting to sell organic and actually getting organic product is not the same thing.
What has been going on around the industry is that retail buyers, under instructions from their bosses to standardize low volume items on organic, have had meeting with vendors — people like HerbThyme, though often much smaller. In those meetings, the retailers explain their strategies and the suppliers explain that they would happy to supply organic product, though when supplies of organic are tight, they may have to work together and handle conventional.
Everyone leaves happy, the retailers soon forget the vendor’s soft-peddled warning about “when organic supplies are tight,” and the vendors forget that the retailers have made clear they want only organic.
But there simply isn’t enough organic product to begin to meet these orders.
Of course, the proper response, the ethical response, is for vendors to make that clear in those initial meetings and to clearly shout out each and every time they don’t have organic product available.
The temptation is tough though. These are mostly smaller players, sweating out a living and they have a PO sitting there for the taking if only the product is organic. Our sense is that more than a few small players are grabbing the PO and hoping they won’t get caught.
In other words, this explains why the statement in our interview of HerbThyme’s Business Director Ben Ho was incomplete.
“It doesn’t make sense monetarily; the disparity between conventional and organic isn’t that material. It’s not like we make twice the money by selling organic. The complaint accuses our company of acting fraudulently to become more profitable, but that goes against common sense.”
But what if the gain by selling organic was not a price differential but, instead, the whole business with the retailer — the whole business relationship? That would be a substantial incentive. And, by the way, vendors can be put in an almost impossible situation in these matters as the bad drives out the good. In other words, the shortage of organic product should lead prices to rise, which will bring about production of more organic product. But fraud lets organic be sold at conventional prices — thus explaining those small spreads, as Ho mentions.
In a variant of Gresham’s Law, the fraudulently labeled organic produce tends to drive the true organic out of the market because the price does not rise to a level to justify organic production. We gave a lecture at Cornell on this subject related to food safety, building on George Akerlof’s seminal essay, The Market for Lemons: Quality Uncertainty and the Market Mechanism. Although Akerlof was writing about used cars, the essay really dealt with any item on which buyers and sellers had asymmetrical information — as with organics.
Although these are not the big players, this is poison for the trade’s image with consumers and for the future of organics. It has to be stopped.
Although improving organic certification is desirable, right now the system, which involves tracing the paperwork around organic production, is really not set up as a fraud-prevention program. One can be running a perfectly legitimate organic business, have every certification necessary and commit this kind of fraud with little risk of being caught.
In HerbThyme’s case — if the allegations made in the complaint are true and, based on HerbThyme’s public statements, they are true to at least some extent — it is notable that it was not the National Organic Program’s declaring them persona non grata which brought this to light.
Still, the very nature of these small players means they will likely fly under the radar and so will always be difficult to catch through official channels.
Retailers are also not without blame. They like paying only small differentials for organic and may prefer to turn their heads instead of really investigating the provenance of the product they are selling.
As such, retailers are going to have to assert more authority and demand more specificity. They probably need to contract for these low volume items and get specific representations as to how much will be grown, on which farms at which times. The retailers then need to hire an organization like Primus to go verify it is all happening as intended. They can put in the contract details of how the auditor gets paid.
Trades all have their “dirty little secrets” that nobody wants to talk about. On these low volume items, nobody wants to talk about the disjunction between retail desires and product availability. The result is extreme pressure being put on otherwise honest suppliers to commit fraud, and vendors and retailers being complicit in defrauding consumers.
There is a lot of blame to go around. The point is that all this is a dirty business and the industry has to act now to clean it up. We can admonish morality on the part of vendors and urge government action to broaden certification but really only retailers taking product integrity and honest consumer marketing seriously have the power to solve this problem.
Alexander Hamilton was a remarkably prescient man and we, to an astonishing degree, live in the Republic he created. His vision of a commercial Republic clearly has won the future even if his opponent, Thomas Jefferson, may have won our hearts with his vision of an Agrarian future.
Yet on one point at least, he may have been in error. Writing in Federalist No. 78, Hamilton explained that the Judiciary branch was the “least dangerous” of our three governmental branches — the executive, the legislative and judicial. As he put it:
Whoever attentively considers the different departments of power must perceive that, in a government in which they are separated from each other, the judiciary, from the nature of its functions, will always be the least dangerous to the political rights of the Constitution; because it will be least in a capacity to annoy or injure them.
The Executive not only dispenses the honors, but holds the sword of the community. The Legislature not only commands the purse, but prescribes the rules by which the duties and rights of every citizen are to be regulated. The Judiciary, on the contrary, has no influence over either the sword or the purse; no direction either of the strength or of the wealth of the society; and can take no active resolution whatever.
It may truly be said to have neither FORCE nor WILL, but merely judgment; and must ultimately depend upon the aid of the executive arm even for the efficacy of its judgments.
Yet today, it is not as obvious that this is true.
The traditional understanding of the role of a Justice of the Supreme Court in Constitutional Law was to attempt to read the document as it read to those who adopted the document.
If you didn’t like what was adopted, you had an obligation to either pass a law or to amend the Constitution.
More recently, however, a movement build around the “living constitution” has grown, and this belief is that the meaning of the Constitution changes as the attitudes of the people and the times change.
The contrast between these two attitudes can be seen in how advocates dealt with an issue such as the vote for women.
Justice Antonin Scalia made the point:
Consider the 19th Amendment, which is the amendment that gave women the vote. It was adopted by the American people in 1920. Why did we adopt a constitutional amendment for that purpose? The Equal Protection Clause existed in 1920; it was adopted right after the Civil War. And you know that if the issue of the franchise for women came up today, we would not have to have a constitutional amendment.
Someone would come to the Supreme Court and say, “Your Honors, in a democracy, what could be a greater denial of equal protection than denial of the franchise?” And the Court would say, “Yes! Even though it never meant it before, the Equal Protection Clause means that women have to have the vote.”
But that’s not how the American people thought in 1920. In 1920, they looked at the Equal Protection Clause and said, “What does it mean?” Well, it clearly doesn’t mean that you can’t discriminate in the franchise — not only on the basis of sex, but on the basis of property ownership, on the basis of literacy. None of that is unconstitutional. And therefore, since it wasn’t unconstitutional, and we wanted it to be, we did things the good old fashioned way and adopted an amendment.
This was a dramatic change. If a Justice on the Supreme Court would read the text, try and understand what it meant to the people who adopted it and do so without regard to their own personal policy preferences, then we could look to select the best lawyers for the Supreme Court. We would want top lawyers, fair people, honest people who could read intelligently, accurately and squarely.
It wouldn’t matter what their opinions were on any issue, be it the woman’s right to vote or abortion, because they are interpreting a text and it would be common to have Justices say “If I were a legislator, I would vote in favor of XX. However, the Constitution is silent on that subject so either get the legislature to pass a law on that matter or get a constitutional amendment passed.”
For all the industry spends on government relations, we tend to stay out of the big battles. This is smart as the industry has no distinctive opinions on these matters and, in any case, we are too small to have much influence. But our prosperity is more likely to be determined by the success of the polity than by the regulation of a pesticide so, especially in times like these, those who can should try to make a contribution to the public debate.
We gave it our shot and so the Pundit wrote a piece for The Weekly Standard, titled The Right’s Supreme Court Acquiescence, which drew heavily on Justice Scalia’s work to deal with the dilemma of a conservative movement torn between its belief that the ideology of Supreme Court Justices ought not to matter and the reality that it does.
The death of Lena Horne at age 92 brought the accolades expected and deserved by a woman who broke many racial barriers in her long career in entertainment and who served her country by working to entertain the troops during World War II.
She was famous long before the Pundit was born, though her Hollywood career was limited. She refused to play servants or other roles she thought demeaned African-Americans, and movie producers mostly cast her in roles like that of a nightclub singer, so her part could be easily clipped when the movie played down south.
We knew her standards, of course, like Stormy Weather, which really established her as a star:
Lena Horne’s real impact on us came from a brief mention in a book titled, Yes I Can: The Story of Sammy Davis, Jr. , which is Sammy Davis Jr’s autobiography. We read the book as a young teenager and remember a scene described by Sammy Davis Jr. As we recall the story, Lena Horne was headlining at some big Las Vegas hotel — and she was a big enough draw to insist on staying in the hotel, although most black entertainers were sent to hotels in the black neighborhoods.
But Lena Horne was a star; she insisted on staying and the hotel went along. In the story she went for a dip in the pool, and as soon as she was done the hotel drained the water and cleaned the pool, lest any white person should be “contaminated” by the water she had swum in.
The scene has always stayed with us, as an illustration of how deep prejudice can go and the dangers of believing things without scientific foundation.
Fearing a chemical without scientific evidence is justified in the same way that fearing to swim in water touched by a black body was once justified. Both are a reversion to irrationality, both are prejudices — judging before one has sufficient evidence.
We tried to tell the children about Lena Horne, tried to caution them about the dangers when humans abandon rationality and pander to prejudice. You never know with children if you are getting through, but we try, and we found a video that both showcased Lena Horne’s talent and put her story in a context that children could understand, thought we would share it, its great for everyone to watch and, especially great to tee off a discussion of prejudice with children:
He may be a long shot, but it speaks to the national mood that an ad for a candidate running for the Republican nomination for Ag Commissioner in the state of Alabama has quickly gone viral and become the iconic ad of the voter mood for campaign 2010:
You can see Dale Peterson’s campaign web site here.
A fair amount of the public attention paid to this issue is a result of Joel Nelsen, President of California Citrus Mutual, deciding to speak out.
Earlier this year he sent a letter to PMA and United:
March 5, 2010
Mr. Tom Stenzel, President United Fresh Produce Association
Mr. Bryan Silbermann, President Produce Marketing Association
Since my last communication dated February 12, I have continued to review the PTI system proposed. How would it be implemented into our industry? Would it accomplish the objective or is there a better alternative? It was an extensive review coupled with a vast amount of reading on the websites speaking to the subject.
I have talked with Tom at his recent GR session and spoke with Terry on the PMA staff. I have read the Steering Committee press release and subsequent trade media articles. I have electronically communicated with several vendors on the subject.
I have now concluded that the aforementioned proposal would have a tremendous impact on the existing systems within our industry both from an engineering, software and economic perspective without achieving any greater information than what is already available nor in any faster manner.
I have determined that the use of this system will not accomplish the traceability desired at the receiving station for our commodity. I do believe our industry has a system in place that can achieve the desired food safety goal. California Citrus Mutual therefore urges United and PMA to initiate talks with the steering committee to postpone the October 1, 2010 milestone for the fresh produce industry. I offer these brief bullet points as reasons:
Under the proposed system and because the vast majority of our shippers pack 10 sizes, three grades and in some cases different varieties of fruit daily to satisfy retail demand, the volume of GTIN numbers demanded by our industry would be staggering. A vertically integrated grower/shipper, of which there are five out of 85 shippers in our industry, would at a minimum require 8,000 GTIN numbers.
A typical citrus shipper has 100-200 growers, multiple blocks and different varieties of citrus, to monitor in accordance with existing law. They each have a system that can trace back to the block and most are remarkably similar. The GTIN proposal would require each one to have at a minimum 10-15,000 GTIN numbers. Multiply that number by a minimum of 75 shippers.
My earlier estimate of a $25m expenditure for our industry is conservative. There are no guarantees that the data could/would be accepted at receiving point. Already receivers have a one-year delay in accepting the data. Already receivers are contracting with single vendors to impose their system. This is not uniformity and in fact is creating another cottage industry similar to the food safety audits imposed on producers. Examine your own publicity. One photo shows a truck of citrus. The photo is misdirected in that the methodology portrayed is fruit leaving the packing house destined for the juice plant. Our fresh citrus is not handled in this manner and both fresh and processed can be traced back to the grove.
All of your publicity depicts bulk product displayed at retail. Where is the identity for the product? A case stamp details the information desired but the product loses its identity at retail and at the consumer level under the present system.
The RFID technology only follows the location of the carton/case, not necessarily the product. Why must receivers have this detailed information when in fact their need to know is the origination of where the product was processed? The burden then falls on the shipper to produce, according to existing law, the specific location in which the product was grown and harvested. That data and information flow already exists. GTIN promotion details the savings and efficiencies for “the system.”
The reality is that the program was designed to create more efficient inventory control for the receiver and had nothing to do with food safety. There is an assumption by vendors, consultants and receivers that the GTIN program can be modified into a one-size fits all food safety approach for the entire fresh produce industry.
Again, I offer once again, the willingness to sit down and discuss the situation in depth with members of the steering committee. I have suggested that such a discussion take place at the United Fresh meeting in April. But because of pressures by vendors, perceptions by receivers and statements by the steering committee after the Dallas session, we urge an immediate announcement that the October milestone be delayed to determine whether the approach is suitable for the entire industry.
Again, we have no problem with the goals and objectives of traceability for food safety purposes. In fact we believe we can show a better way to achieve that objective for this industry.
— Joel Nelsen, President California Citrus Mutual
Now Joel follows up with this note to the Pundit:
Jim — This is my first time commenting on your column.
The PTI effort is not void of leadership, nor is the concept a bad idea.
The problem was the narrow approach that limited ideas to achieve a practical solution.
Reconfiguring systems at the grower/shipper level to satisfy an objective without adequate input was a mistake.
There was input but from a narrow group of entities that are not typical of the entire supply chain.
There was too much influence from vendors whose agenda was solely sales and revenues, not efficiencies or full traceability.
PTI was presented as the latter when in fact it did not and does not accomplish that goal.
It was sold as an efficient tool when in fact for a select few it was but not yet the broad customer base.
It was sold at the national level without taking it to the field for practical application.
PTI is not dead, nor is it void of leadership. It is just not done.
You can see in the associations’ joint press release, which we dealt with here, a response to many of Joel Nelsen’s concerns. The deadline for producers is pushed back as Nelsen requested and there is a plan for pilot projects, which responds to Joel Nelsen’s desire for “taking it to the field.”
But, those shippers will still have to spend a lot of money on GTINs, and the system still will not provide total industry traceability as we have pointed out many times with our story of Ken, the guy with red truck. So it is not clear that the associations really solve Joel Nelsen’s problems with PTI.
It is worth noting that not all citrus producers seem to endorse the position of California Citrus Mutual. Paramount, for example, was quite vocal at United in letting people know that it was going full steam ahead with PTI. They expressed the belief that PTI was the “right thing to do” and we believe them.
However, that is an easier position to take if you are well capitalized and able to implement PTI without a problem.
This whole issue may be starting to demonstrate another reason the industry is splintering a bit over PTI. PTI is a gold standard on traceability — but it is very expensive.
This is actually a big benefit for many companies. If retailers will constrain their supply chains to companies that can afford to buy 8,000 GTINs, in the case Joel Nelsen articulates, this will serve as a significant barrier to entry for poorly capitalized competitors.
Wait until this all goes into effect and retailers exempt local growers who, on diversified farms, simply won’t own the GTINs to meet the PTI requirements.
This won’t affect Joel Nelsen’s citrus growers much, but there will be plenty of screaming from other sectors.
Many thanks to Joel Nelsen and California Citrus Mutual for chiming in on the debate.
Stephen D’Arrigo used to always emphasize that when one went into an association meeting, one had to leave his or her corporate hat behind.
Although big companies with decided interests may look to have their representatives on key boards, for the most part these associations only work if people put aside their proprietary interests.
The question really is when they take off their corporate hat, what hat do they put on?
Is it their association hat? Or their industry hat?
There is a tremendous temptation to speak as “Engine Charlie” Wilson, then CEO of General Motors, did during his nomination hearings to be Secretary of Defense during the Eisenhower administration and declare that “…what is good for General Motors is good for the country, and vice a versa.”
But there is no particular reason to think this must be true. It is very plausible that a decision could be bad for a particular association, but good for the industry.
This poses a dilemma because a board member of an association has a certain obligation to that entity.
On the other hand, these associations are created to serve industry purposes so defending the association at the expense of the industry doesn’t seem quite right.
In any case, our sense is that the industry is getting more impatient with the situation.
When we received the latest PTI missive (which we dealt with here) we had a perfect example of PMA, United and, in this case, CPMA, working together harmoniously. Yet there does seem to still be a lot of waste.
After all, didn’t that mean that three separate staffs had to negotiate and vet that letter? Where is the efficiency in that? Can’t we reduce it to one staff per country?
There is no easy answer — but there are substantial reasons to look for better ways.
Economic turmoil is causing industry leaders to seek better efficiency, an activist government causes industry leaders to focus on speaking clearly with one voice, and the expectation that big companies will be called upon to help support United’s new convention venture co-locating with FMI is leading many to ask if there isn’t another way to fund the good work of United on lobbying without a trade show.
We detailed our suggestion here and dealt with some objections raised by Chris Schlect, President at Northwest Horticultural Council, right here.
The idea: Let PMA buy the retail-oriented portion of United’s show and use the money to fund robust government relations program.
What is clear is that we want to move while both associations are healthy so we can act, as Al Vangelos points out, methodically and thoughtfully, not out of desperation.
Many thanks to Al Vangelos and Sun World for helping us address this important topic.
It is always great to hear of folks with upstanding moral character in this industry, especially in light of the recent Salyer and now, apparently, the HerbThyme situation… It begged us to share what happened this past season in what is known as the “scrappy” world of winter imports where survival of the fittest is the battle cry.
As you know, this past winter Florida had a freeze, which meant that those involved in imports from Mexico stood to make a killing on the deal. Many did. Yet what separated the “boys from the men” here were that some of the importers/distributors and growers who, even though they had a right to charge what they could… to short when they could get away with it… in short, to take full advantage of the situation with impunity… decided not to do so.
In our contacts with retail buyers, we heard of such companies: few but notable. We heard of folks who decided they would remain steady with their customers and continue to offer the same pricing and delivery they had always provided. In short, they declined to take full advantage of a situation where no one would have blamed them should they have done so. To us, that spells integrity.
Sorry, Veronica, but we see no ethical dilemma in maximizing profits. In fact, we think when hurricanes and other natural disasters hit and people attack some for “profiteering” because they sell items at high prices — they are actually increasing human suffering. It is, in fact, those high prices that motivate others to find ways to overcome the logistical difficulties and get product to those who need it.
Does that mean we would always try to charge what the market will bear? That depends on the nature of our relationships with buyers. If we were selling our product at auction, we would happily take what we could get — certain that if things were in oversupply, our customers would pay as little as they could.
If we were dealing with a chain on a regular basis, usually the relationship modifies the market a bit — neither rising as fast nor dropping as fast as the commodity price. Very possibly, to help our customer and to avoid being seen as mercenary, we would sell for less than we could get elsewhere.
It is important to note, though, that we would be doing this to sustain and strengthen our relationship with the customer — in other words, we would be doing this in the hope of making more money in the long run than we could hope to make by maximizing our short term profit.
One key ethical issue involves honoring contracts and agreements — yet even this is a complex area. If a contract contains a force majeure clause, or if a statute calls for such a clause and a contract doesn’t specifically disavow it, then the contract itself covers circumstances under which it won’t be honored.
The Poppa Pundit taught us that one should use a market, not abuse a market. We took that as a teaching that if you want to be in business a long time, you have to not just think about today, but also about tomorrow, and bankrupting your customers isn’t a useful way to build a business.
The reason for exercising pricing moderation is that one is teaching one’s customers that working with you is valuable because, among other things, you will take care of them when supplies are tight.
Yet ethics is never so simple and moderating the pricing may sound like a nice thing to do — but often, in produce, the marketer doesn’t fully own the produce. If the marketer is representing a grower, but not getting all he could in order to build customer relations, maybe he is cheating the grower who, after all, may use a different marketing agent next season.
Many thanks to Veronica Kraushaar and VIVA Global Marketing for helping us think through this important subject.